LONDON, June 4: Stock markets retreated Tuesday on signs of weakness in the US economy, even as the data boosted hopes for an interest rate cut.
Mumbai tumbled as it appeared Indias Prime Minister Narendra Modi would not win as big an election victory as expected.
Shares in global energy firms were weighed by a further drop in oil prices as OPEC members and other major crude producers look to lift output before the years end.
Investors have shifted nervously in recent weeks on concerns that the Federal Reserve will not cut US interest rates until 2025 as inflation remains stubbornly above target and decision-makers warned against moving too early, insisting on seeing more evidence that price rises are under control.
The Institute for Supply Management (ISM) released its manufacturing index on Monday, showing US activity contracted for a second successive month in May. The figures indicated that businesses were struggling with elevated interest rates and weak consumer spending, among other things.
"The manufacturing ISM data reaffirmed several prevailing economic trends: decelerating inflation, slowing growth, and a tight labour market," said Gary Pzegeo of CIBC Private Wealth US.
"We should see higher odds of a rate cut later this year priced into interest rate futures."
While traders have of late taken soft economic data as a positive sign, owing to the fact it gives the Fed room to cut rates, the latest news stoked concerns about the outlook for the economy.
BMO Capital Markets Ian Lyngen and Vail Hartman said "investors are on guard for indications that the downside trajectory is accelerating".
Traders are awaiting Fridays release of US non-farm payroll figures for a fresh snapshot of the labour market in the worlds biggest economy.
Wall Streets three main indexes diverged Monday with the Nasdaq and S&P 500 supported by Big Tech.
Selling pressure carried over into Asian and European trading Tuesday.
Mumbai tumbled more than seven percent at one point as Modis Bharatiya Janata Party looked set to win Indias national elections but not with the landslide initially expected.
The Sensex had jumped more than three percent Monday on hopes a big majority would help Modi push through economy-boosting measures. —AFP
